Why does the Wall Street regulation overhaul give FTC authority over the Internet?

posted at 11:35 am on May 1, 2010 by Ed Morrissey

Earlier this week, the Washington Post reported on another little Easter egg in a bill cruising through Congress that would normally have followed Nancy Pelosi’s policy of discovery ex post facto. Democrats have pushed hard to get the financial-regulation reform bill unstuck in the Senate, mainly playing on class-warfare themes in painting the GOP as the party of eeeeeeevil Wall Street robber barons. However, the House version of the bill contains provisions that would put the Federal Trade Commission in position to start issuing rules on Internet transactions that would not only slow down business growth but also have no relevance at all to the financial collapse that prompted the bill:

The Federal Trade Commission could become a more powerful watchdog for Internet users under a little-known provision in financial overhaul legislation that would expand the agency’s ability to create rules.

An emboldened FTC would stand in stark contrast to a besieged Federal Communications Commission, whose ability to oversee broadband providers has been cast into doubt after a federal court ruled last month that the agency lacked the ability to punish Comcast for violating open-Internet guidelines.

The version of regulatory overhaul legislation passed by the House would allow the FTC to issue rules on a fast track and permit the agency to impose civil penalties on companies that hurt consumers. FTC Chairman Jon Leibowitz has argued in favor of bolstering his agency’s enforcement ability. …

Major media, telecom and cable companies stand to win or lose greatly from changes at the FTC and FCC. For example, a proposed rule at the FCC would force carriers to treat all Web traffic equally on their networks. That has drawn sharp opposition from broadband service providers, who would prefer that Congress mandate such a change. Comcast has complained that some traffic is so heavy that it slows the entire system.

The proposal to expand the FTC’s authority has sparked a flurry of lobbying by advertisers, industry groups and the U.S. Chamber of Commerce, which are seeking to block it citing concerns about possible overreach by the agency.

This has become a pattern with this Congress and administration. Despite having large majorities in both chambers, Democrats refuse to use the legislative path to pass regulation — mainly because the regulations they want are too radical to pass. Instead, they shift the creation of regulation to agencies like the EPA and its “endangerment” finding for CO2, which would then require Congress and the President to undo rather than vote to impose in the first place.

Even considering that pattern, this is something out of the ordinary. Neither the FTC nor the Internet had anything to do with the Wall Street meltdown in 2008. If this financial-regulation bill is so desperately needed, why did House Democrats lard it up with this power grab at the FTC? Why does the FTC need any further authority over the Internet, where fraud and abuse regulations apply already? The Internet economy has been one of the bright spots throughout a dismal period of recent history. Do we need to attack the one area that shows growth and promise?

Nancy Pelosi knows that her Democratic majorities won’t last much longer. She wants to leave behind a Byzantine structure of unaccountable bureaucrats and embedded power to accomplish what she can’t get through the legitimate processes of lawmaking, and she’s hiding those efforts in so-called emergency legislation. Keep an eye on this during the conference committee on the financial-regulation bill; it’s not in the Senate version, but will almost certainly reappear in the conference report.